Independent Director of Dhanlaxmi Bank Resigns

Sridhar Kalyanasundaram, one of the Independent Directors of Dhanlaxmi Bank, has submitted his resignation from the bank’s Board of Directors. In his resignation letter, he cited several reasons for his decision, including instances where his input as an Independent Director was deliberately negated or overruled to support the decisions of the Managing Director and CEO of the bank.

Here are excerpts from Sridhar Kalyanasundaram’s resignation letter from Dhanlaxmi Bank:

1. Rights Issue: Kalyanasundaram mentioned that the Rights Issue of the bank was approved by the Board but was delayed for over nine months due to various issues, including the composition of the Board. Despite efforts to address the issues and his 81 queries on the Issue Agreement, it remained unresolved. He expressed his dissent at every attempt to clear it and even faced threats of removal from the Board.
2. Capital Enhancement: He advised the enhancement of the bank’s Authorized Capital from INR 400 Crores to INR 5000 Crores for competitiveness. However, his proposal was denied, stating that it should be considered only after the pending rights issue was cleared. Surprisingly, the proposal later appeared in the Board Agenda and was accepted, raising questions about the conduct of certain board members.
3. Conduct of Board and Committee Meetings: Kalyanasundaram highlighted irregularities in the way Board and Committee Meetings were conducted, including the decision on agendas and meeting frequencies. His concerns were dismissed as “not a serious issue,” leading to the Management’s avoidance of holding some Committee Meetings despite Board approval.
4. Unethical Conduct: He pointed out the unethical use of the One Time Settlement (OTS) scheme, which had no impact on the bank’s NPA position. Specifically, he mentioned the case of the OTS for Jalan Hotels of Kolkata, where a guarantor was released despite the original debtor’s clearance by the consortium of banks. Despite his objections, the proposal was approved.
5. Unilateral Arrogation of Powers: Kalyanasundaram raised concerns about the CEO’s appointment, stating that a shareholder alleged discrepancies in the CEO’s 2021 appointment. This allegation was made in May 2023.

The resignation of an Independent Director citing differences with the bank’s management raises questions about corporate governance and decision-making processes within the bank.